I am a MA/MBA candidate at the Lauder Institute and the Wharton School of Business. I focus on Russian politics, economics, and demography but also write more generally about Eastern Europe. Please note that all opinions expressed here are mine and mine alone and that I do not speak in an official capacity for Lauder, Wharton, Forbes or any other organization.
I do my best to inject hard numbers (and flashy Excel charts) into conversations and debates that are too frequently driven by anecdotes. In addition to Forbes I've written for True/Slant, INOSMI, Salon, the National Interest, The Moscow Times, Russia Magazine, the Washington Post, and Quartz.
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Why the Comparison Between Chinese and Russian Investment Levels Is Useless

Russia’s level of investment is, and has been for the past decade, far closer to the levels of developed, wealthy countries than to China‘s. I don’t find this to be particularly alarming or surprising for three reasons. First, because Russian investment collapsed so catastrophically during the 1990′s the current levels are actually an improvement: as you can see from that chart, Russian investment has substantially increased from the depths it reached in 1999 and has done so during a time that overall GDP has grown dramatically (the actual expenditures on investment have thus exploded). Second, because on the basis of per-capita income, Russia is actually closer to developed Western countries than it is to China: China is quite simply much, much poorer than Russia and you would therefore, knowing nothing else about either country’s political or economic histories, expect its investment level to be somewhat higher. Third, because China’s level of investment has been roundly and repeatedly criticizedas excessive, and even dangerous, by a bewildering arrayof Westernand Chinese economists, bureaucrats, and pundits. Barely a day goes by without an article being published bemoaning China’s unprecedented level of investment, a level which has absolutely no parallel in economic history. Thus saying “why hasn’t Russia been investing as much as China?” is basically tantamount to saying “why hasn’t Russia been investing more than any other country in the history of mankind?”

Nonetheless, I am still surprised by just how often you will see mainstream news publications dismissively compare Russia’s level of investment with China’s. Take for example a story in yesterday’s Wall Street Journalabout Russia’s slowing rate of economic growth:

While Mr. Putin often tout’s his country’s performance as strong compared with neighbors in crisis-wracked Europe, it doesn’t stack up as well against other developing economies. Russia’s economy expanded by 4.3% last year, compared to 9.5% in China and India’s 7.8%.

Mr. Putin also promised to transform Russia’s $1.9 trillion economy into the world’s fifth largest, lifting it out of the 11th place spot it currently occupies.

To help achieve that, Mr. Putin has pledged to boost investment as a share of domestic product to 25% by 2015 from 20% now, which is less than half the rate in China. Friday’s revised figures see investments growing by 6.6% in 2012, short of the 8% annual growth needed to hit Mr. Putin’s target.

China’s level of investment, which Russia can achieve less than half of, is so massive and excessive that it is threatening to destabilize the entire global economy. Why would Russia possibly want to duplicate that? Why would we, or anyone else, want Russia to mimic the draconian elements of state economic intervention that allow China to suppress consumption and artificially inflate investment? To achieve anything remotely comparable to China-like rates of investment, Russia would have to become substantially less economically liberal than it is today (and, one would imagine, this level of increased state control would have deleterious political consequences as well). Lastly, considering Russia’s horrific history of forced saving and investment during Stalinist industrialization I think a Russian economy that is slightly too focused on consumption seems to me to be greatly preferable to the alternative.

Rather than comparing Russia to China, the far more enlightening comparison is between Russia and other post-Communist countries in Eastern Europe. It should be noted that this comparison is still not particularly flattering to Russia, but the gap is not nearly so dramatic or insurmountable as that between Russia and China.* So, yes, Russia should still seek to increase investment but it is beyond useless to compare it with China.

* I would note that Russia and Poland (by far the 2nd biggest economy of those in the group of countries analyzed on that graph) mirror each other almost exactly in their level of investment. Poland, of course, is widely considered to be a star performer and it has weathered the economic crisis better than any other country in Europe (including Germany!)

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Once again, hilariously false disinformation that fools, and could fool, nobody. What could be more rib-tickling that to see this unknown blogger claim he’s smart and the world’s leading financial publication is stupid? A real hoot!!

Those looking for some real facts about the Russian economy will find them here:

While Adomanis touts good news for Russia, the world is laughing because it knows (a) he doesn’t invest a dime in Russia and (b) capital flight is soaring to record new levels because people who put actual money on the line know what’s really happening in Russia and (c) inflation is about to explode once again (so says the IMF, another pack of idiots by Adomanis no doubt) and (d) the Kremlin itself admits economic growth is stagnating (doubtless the Kremlin, too, knows nothing about the Russian economy and should consult Adomanis, whose business and financial success is renown throughout the world, look out Mr. Buffet!).

Even by Adomanis’s low standards, however, it’s still surprising he doesn’t know that Russia is by far the most corrupt major civilization on the planet, so any talk about “investment” there is meaningless, since the vast majority of it will be stolen long before it ever reaches any meaningful target. All one has to do (and clearly Adomanis has never done it) is to spend a weekend a few hundred miles from Moscow to see unquestionably that this is true. Or look at the the list of nations ranked by life expectancy, where China ranks #80 and Russia ranks #112.

Your reply is, unsurprisingly, completely irrelevant. I said that it makes no sense to compare Russian to Chinese investment levels and laid out several reasons why I think this is the case. I was trying to make no other point: all I was saying is that, since China’s level of investment is unprecedentedly and dangerously high, Russia should not be compared to it. You write about corruption, inflation, and life expectancy which have nothing to do with my argument. Well done as always Kim, and thanks for the trolling

There is absolutely ZERO reason to believe that corruption has ANYTHING to do with the current increase in capital flight from Russia. The more realistic explanation is that it is a direct response to the Kremlin increasing taxes in 2011. Corruption hasn’t magically quadrupled in scope over the past 3 years but capital flight has. What’s changed is the tax structure.

I do wonder what your reaction is to US corporations hoarding trillions outside the US. Is this a response to corruption too or just tax dodging? Russia is not a low tax country right now by any stretch of the imagination. On the macro side that’s the only big change you can really connect to the current capital flight. The corruption boogeyman is a lazy trick for journalists as it allows you to write off a much more complex picture. You need to eat up a couple hours running regressions on a supercomputer to get any sort of accurate picture of the capital flight in Russia. The corruption boogeyman is so over used is it really any wonder that Putin basically rolls his eyes when its brought up?

2. Inflation is NOT going to explode, but it will rise owed to the need to raise utility rates. A return to 5% inflation is pretty much a given, but it was obvious to everyone that the 3.6% rate was a temporary election gimmick. If it jumps over 6% bump this thread and you can call me an idiot, but it wont.

Thousands of people in Russia are interested in articles in the foreign press about us. Do you know, what we often do reading it. We laugh :) For write such a nonsense about dying of Russia and bloody dictator Putin. Nonsense, absolutely does not correspond with reality. Even Mark. He is often right, but often far from the truth.

Many of you may continue to dream about the fact that everything in Russia is bad. That all just fall apart and all will die. You can live in these dreams, with your pink elephants. Meanwhile, we will be building the country not asking you :)